Power to reduce or waive penalty,etc., in certain cases.
469(1)
Irrespective of anything contained in this Act, the Principal Commissioner or Commissioner may, whether on his own motion or otherwise, at his discretion reduce or waive the penalty imposed or imposable under section 439 if he is satisfied that such person,––
- (a) before the Assessing Officer detected any concealment of particulars of income or of the inaccuracy of particulars furnished in respect of such income, has made a full and true disclosure of such particulars voluntarily and in good faith; and
- (b) has cooperated in any enquiry relating to the assessment of his income and has paid or made satisfactory arrangements to pay any tax or interest payable in consequence of an order passed under this Act in respect of the relevant tax year.
469(2)
For the purposes of sub-section (1), a person shall be deemed to have made full and true disclosure of his income or of the particulars relating thereto if the difference between the assessed and returned income does not attract penalties under section 439.
469(3)
If the penalty under section 439 relates to income or disclosure in respect of income relates to more than one tax year and aggregate amount of such income or disclosure thereof for such years exceeds five lakh rupees, the Principal Commissioner or Commissioner shall obtain prior approval from the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General, as the case may be, before waiving or reducing the penalty by order referred to in sub-section (1).
469(4)
Where an order has been made under sub-section (1) in favour of any person, whether such order relates to one or more tax years, he shall not be entitled to any relief under this section in relation to any other tax year at any time after the making of such order.
469(5)
The Principal Commissioner or Commissioner may, upon an application from the assessee, and after recording his reasons for doing so, reduce or waive the amount of penalty or penalties (whether they relate to one or more tax years) payable by the assessee or stay or compound any proceeding for the recovery of any such amount, if––
- (a) doing otherwise would cause genuine hardship to the assessee, having regard to the circumstances of the case; and
- (b) the assessee has cooperated in any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him.
469(6)
The Principal Commissioner or Commissioner shall take prior approval from the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General, as the case may be, if the aggregate amount of penalties reduced or waived or compounded, as the case may be, under sub-section (5), exceeds one lakh rupees.
469(7)
An order under sub-section (5), accepting or rejecting the application under the said sub-section, shall be passed within twelve months from the end of the month in which such application was received by the Principal Commissioner or Commissioner.
469(8)
No rejection of application under sub-section (5) shall be made without giving the assessee an opportunity of being heard.
469(9)
Every order made under this section shall be final and shall not be called into question by any court or any other authority.
Section Summary:
Section 469 grants the Principal Commissioner or Commissioner the authority to reduce or waive penalties imposed under Section 439 of the Income Tax Act. This discretion can be exercised if the taxpayer voluntarily discloses income details before detection by the Assessing Officer, cooperates in the assessment process, and arranges to pay the due tax or interest. The section also outlines conditions for deeming a disclosure as "full and true" and sets limits on the aggregate income or penalties for which prior approvals are required.
Key Changes:
- Discretionary Power Expanded: The Principal Commissioner or Commissioner now has broader discretion to reduce or waive penalties, even in cases involving multiple tax years or higher penalty amounts, subject to prior approvals.
- Prior Approvals for Higher Amounts: If the aggregate income or penalties exceed ₹5 lakh (for Section 469(1)) or ₹1 lakh (for Section 469(5)), prior approval from higher authorities is mandatory.
- Time-Bound Decisions: Applications for penalty reduction or waiver must be decided within 12 months of receipt.
- Hardship Consideration: Penalties can be reduced or waived if enforcing them would cause genuine hardship to the taxpayer, provided the taxpayer cooperates in the assessment or recovery process.
Practical Implications:
- For Taxpayers:
- Taxpayers who voluntarily disclose income errors or omissions before detection by tax authorities can benefit from penalty reductions or waivers.
- Those facing financial hardship can apply for relief, but they must demonstrate cooperation in the assessment process and arrange to pay due taxes or interest.
- For Tax Authorities:
- The section streamlines the process for penalty relief but imposes stricter oversight for higher penalty amounts through prior approvals.
- Authorities must ensure timely decisions (within 12 months) and provide taxpayers with an opportunity to be heard before rejecting applications.
Critical Concepts:
- Full and True Disclosure: A disclosure is considered "full and true" if the difference between assessed and returned income does not attract penalties under Section 439. This means the taxpayer must correct errors before the tax authorities detect them.
- Genuine Hardship: This refers to situations where enforcing penalties would cause significant financial difficulty to the taxpayer, considering their specific circumstances.
- Aggregate Income/Penalties: For multiple tax years, if the total income or penalties exceed ₹5 lakh (Section 469(1)) or ₹1 lakh (Section 469(5)), prior approvals are required.
- Finality of Orders: Orders under this section are final and cannot be challenged in court or by any other authority.
Compliance Steps:
- Voluntary Disclosure: Taxpayers should proactively disclose any errors or omissions in their income details before the Assessing Officer detects them.
- Application for Relief: If seeking penalty reduction or waiver due to hardship, taxpayers must submit an application to the Principal Commissioner or Commissioner, along with supporting evidence of financial hardship and cooperation in the assessment process.
- Payment Arrangements: Taxpayers must pay or arrange to pay any due tax or interest before seeking penalty relief.
- Documentation: Maintain records of disclosures, applications, and communications with tax authorities to support claims of cooperation and voluntary disclosure.
Examples:
Voluntary Disclosure Scenario:
- A taxpayer realizes they underreported ₹3 lakh in income for the 2022-23 tax year. Before the Assessing Officer detects this, the taxpayer files a revised return disclosing the full income. The Principal Commissioner may waive the penalty under Section 469(1) if the taxpayer cooperates in the assessment process and pays the due tax.
Hardship Relief Scenario:
- A small business owner faces financial difficulties due to a natural disaster and cannot pay a penalty of ₹1.5 lakh. They apply for relief under Section 469(5), demonstrating their cooperation in the assessment process and arranging to pay the tax in installments. The Principal Commissioner may reduce or waive the penalty after obtaining prior approval from higher authorities.
Multiple Tax Years Scenario:
- A taxpayer discloses underreported income of ₹6 lakh spread over three tax years. Since the aggregate amount exceeds ₹5 lakh, the Principal Commissioner must seek prior approval from the Principal Chief Commissioner before waiving the penalty.
This section provides a structured framework for penalty relief, balancing taxpayer rights with the need for compliance and oversight.